Twitter has entered into a binding agreement to settle the shareholder derivative lawsuits that accused CEO Jack Dorsey and other executives of misleading shareholders about Twitter’s growth, while selling their own personal stock.
The lawsuits were first filed in October 2016 by shareholder Jack Porter, and accused Dorsey and his colleagues of misrepresenting the growth of Twitter’s (TWTR) user base and artificially inflating the share price.
Porter accused the defendants of exploiting their positions and selling “their personal stock holdings for hundreds of millions of dollars in insider profits” while possessing material, non-public information.
The proposed settlement absolves Dorsey and his co-accused of any wrongdoing without any liability attributed to them or the company.
As part of the agreement, Twitter will implement certain corporate governance adjustments and will pay for certain administrative costs. The company will not be required to make any additional payments.
In addition, under the terms of the settlement, Twitter’s insurers will pay $38 million to the company that will be used for general corporate purposes. (See TWTR stock analysis on TipRanks)
Piper Sandler analyst Thomas Champion initiated a Hold rating on TWTR last week and set his price target at $45. This implies downside potential of around 6% from current levels.
Champion acknowledges that Twitter is an important communication and broadcast platform, punching above its weight in consumer relevance. Mixed financial results and a stunted growth rate has led to Twitter’s share of total digital ad spend falling to an estimated 1% in 2020.
Champions colleagues are slightly more optimistic, with consensus among analysts being a Moderate Buy based on 9 Buys, 16 Holds and 2 Sell. The average price target of $52.04 implies upside potential of around 9% over the next 12 months.
Twitter scores a market neutral 4 out of 10 on TipRanks Smart Score, which implies that the stock is expected to perform in line with market expectations.